Stock market stalls as Minor Cycle looks tired

Market Snapshot for session ending 1-23-12:

Market Overview – What We Know:

• Market closed mixed Monday with S&P fractionally higher while Dow 30, NASDAQ and Value Line were fractionally lower.
• Short and intermediate-term cycles remain positive, but both are also “Overbought.”
  Major Cycle remains near “Neutral.”
• Short-term Momentum in S&P 500 has failed to confirm any of strength in index since December 19 lows.
• Key statistical resistance in S&P holds at upper edge of 10-Month Price Channel at 1336.70. If that level is surpassed odds would substantially increase that May 2011 high at 1370.58 could be surpassed.
• Cumulative Volume (CV) in S&P 500 remains above later October resistance high after breaking above plot resistance last Wednesday, but CV in S&P Emini has yet to follow suit.
• Daily MAAD reached another short-term high Monday and was last only 26 issues from equaling its March 3, 2011 high, a level equal to index pricing last May when S&P 500 hit 1370.58. But weekly MAAD remains nearly 47% below 2011 highs and does not look “eager” to confirm positive daily MAAD movement.
• Daily CPFL was negative Monday for first time in eight sessions.

Market Overview – What We Think:

• Biggest question now hovering over market is “how close to an endgame is the rally that began in early October and will new highs follow before rally is over?”
• We continue to think major resistance will prevail, but it wouldn’t be first time a sharp downside break (May-October) was followed by steady movement to a new high. Think July 2007 (1555.10--S&P 500) that was followed by October 2007 high (1576.09) and second worst bear market in stock market history.
• While our first upside target in S&P 500 at 1310.77 has been exceeded and short-term Momentum has confirmed none of rally since December 19, it is probably only matter of time before short-term “Overbought” condition begins to bite.
• When 10-day Price Channel is inevitably broken (1280.47--Tuesday), extent to which selling then develops will determine staying power of larger Intermediate Cycle in effect since October lows.
• Any upside failure that occurs before new highs are reached would accrue to benefit of bears on longer term.

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